Integrating resource and production decisions in a simple multi-stage assembly system

We consider a simple multi-stage assembly system, with stationary stochastic demand for a single final product that is made-to-stock. The assembly tasks are performed by human resources. This workforce consists of two parts: regular workforce with a long-term contract and temporary workforce, that are contracted based on the actual demand. Contracting resources early is always cheaper than contracting later. When we separate resource and production decisions, we can first determine order-up-to levels and production decisions in a standard way and afterwards find the best mix of regular and temporary workforce. Next to this decoupled approach, we present an integrated approach where these decisions influence each other. In a set of examples we show that the integrated approach can be very beneficial.